Arizona Workers Comp Requirements

Arizona Workers’ Comp Exemption — Best Proven Guide (2026)

By Oleg Kachko · Updated October 7, 2026
✓ Verified October 2026

An Arizona workers comp exemption lets certain business owners legally go without workers’ compensation coverage on themselves — Sole proprietors with no employees are not required to cover themselves (they may choose to buy coverage). A sole proprietor working as an independent contractor for an insured business may also sign a written waiver under A.R.S. § 23-961(N).

An LLC working member who owns 50 percent or more of the membership interest is not covered automatically and is covered only if they apply and the insurer accepts by endorsement, at the insurer’s discretion (A.R.S. § 23-901(6)(r)). Corporate officers and LLC working members who own less than 50 percent are counted as employees and covered automatically. Like any employee, they may reject coverage in writing under A.R.S. § 23-906.

There is no officer-count limit. — while the law still requires coverage for employees once a business has 1 or more. This guide explains who qualifies for the Arizona workers comp exemption, the exact form, where to file it, what it costs, and what an exempt owner gives up. Verified against Arizona sources as of October 2026.

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Arizona at a Glance

Coverage required at 1 employee(s)
Who may elect out Sole proprietors with no employees are not required to cover themselves (they may choose to buy coverage). A sole proprietor working as an independent contractor for an insured business may also sign a written waiver under A.R.S. § 23-961(N). An LLC working member who owns 50 percent or more of the membership interest is not covered automatically and is covered only if they apply and the insurer accepts by endorsement, at the insurer’s discretion (A.R.S. § 23-901(6)(r)). Corporate officers and LLC working members who own less than 50 percent are counted as employees and covered automatically. Like any employee, they may reject coverage in writing under A.R.S. § 23-906. There is no officer-count limit.
Exemption form There is no single state owner-exemption form. (1) Sole Proprietor/Independent Contractor Statement (Sole Proprietor Waiver) under A.R.S. § 23-961(N), published by the Industrial Commission of Arizona. (2) Employee’s Notice of Rejection of Terms of the Arizona Workers’ Compensation Law, Form ICA 04-0113, under A.R.S. § 23-906, used by officers and covered LLC members. It can be undone with the “Employee’s Notice to Revoke Rejection” form.
Filed with Neither form is filed with the Industrial Commission of Arizona. The Sole Proprietor Waiver is not valid until both the sole proprietor and the hiring employer’s insurance carrier sign and date it. The Notice of Rejection is given to the employer in duplicate before any injury, and the employer files a copy with its insurance carrier within 5 days. Forms: https://www.azica.gov/claims-filing-sole-proprietorindependent-contractor-statement and https://www.azica.gov/forms/employee-rejection-terms-form
Penalty for being uninsured Under A.R.S. § 23-907, an uninsured employer loses the protections of the workers’ comp law. The injured worker may sue, and the employer cannot use the defenses of assumption of risk or contributory negligence. Proof of the injury counts as prima facie evidence of the employer’s negligence, so the employer must prove it was not negligent. The worker may also claim through the Commission’s Special Fund (No Insurance Section, § 23-907(B)). The employer must then repay all benefits plus a penalty of 10 percent of the benefits or 1000, whichever is greater, plus interest. Civil penalty: 1000. Up to 5000 for a second failure to secure coverage within 5 years, and up to 10000 for a third or later failure (§ 23-907).

Who Qualifies for An Arizona Workers Comp Exemption

Sole proprietors with no employees are not required to cover themselves (they may choose to buy coverage). A sole proprietor working as an independent contractor for an insured business may also sign a written waiver under A.R.S. § 23-961(N).

An LLC working member who owns 50 percent or more of the membership interest is not covered automatically and is covered only if they apply and the insurer accepts by endorsement, at the insurer’s discretion (A.R.S. § 23-901(6)(r)). Corporate officers and LLC working members who own less than 50 percent are counted as employees and covered automatically. Like any employee, they may reject coverage in writing under A.R.S. § 23-906.

There is no officer-count limit.

Corporate officers are the most common filers of an Arizona workers comp exemption. The rule usually requires the officer to own a minimum share of the company and to file the election in writing before an injury, not after.

⚠ An Arizona workers comp exemption covers the OWNER who elects out — it never excuses coverage for employees. In Arizona, going without required coverage can mean Under A.R.S. § 23-907, an uninsured employer loses the protections of the workers’ comp law. The injured worker may sue, and the employer cannot use the defenses of assumption of risk or contributory negligence. Proof of the injury counts as prima facie evidence of the employer’s negligence, so the employer must prove it was not negligent. The worker may also claim through the Commission’s Special Fund (No Insurance Section, § 23-907(B)). The employer must then repay all benefits plus a penalty of 10 percent of the benefits or 1000, whichever is greater, plus interest. Civil penalty: 1000. Up to 5000 for a second failure to secure coverage within 5 years, and up to 10000 for a third or later failure (§ 23-907).

How to File the Arizona Workers Comp Exemption

The form is There is no single state owner-exemption form. (1) Sole Proprietor/Independent Contractor Statement (Sole Proprietor Waiver) under A.R.S. § 23-961(N), published by the Industrial Commission of Arizona. (2) Employee’s Notice of Rejection of Terms of the Arizona Workers’ Compensation Law, Form ICA 04-0113, under A.R.S. § 23-906, used by officers and covered LLC members. It can be undone with the “Employee’s Notice to Revoke Rejection” form..

It is filed with Neither form is filed with the Industrial Commission of Arizona. The Sole Proprietor Waiver is not valid until both the sole proprietor and the hiring employer’s insurance carrier sign and date it. The Notice of Rejection is given to the employer in duplicate before any injury, and the employer files a copy with its insurance carrier within 5 days. Forms: https://www.azica.gov/claims-filing-sole-proprietorindependent-contractor-statement and https://www.azica.gov/forms/employee-rejection-terms-form.

Filing on the state’s own site costs nothing beyond any statutory fee — the “exemption filing services” that advertise on this search charge for the same form.

Arizona Workers Comp Exemption Rules at a Glance

The exact Arizona workers comp exemption rules every owner should check before deciding to go without coverage:

Employee threshold 1
Who may elect out Sole proprietors with no employees are not required to cover themselves (they may choose to buy coverage). A sole proprietor working as an independent contractor for an insured business may also sign a written waiver under A.R.S. § 23-961(N). An LLC working member who owns 50 percent or more of the membership interest is not covered automatically and is covered only if they apply and the insurer accepts by endorsement, at the insurer’s discretion (A.R.S. § 23-901(6)(r)). Corporate officers and LLC working members who own less than 50 percent are counted as employees and covered automatically. Like any employee, they may reject coverage in writing under A.R.S. § 23-906. There is no officer-count limit.
Form There is no single state owner-exemption form. (1) Sole Proprietor/Independent Contractor Statement (Sole Proprietor Waiver) under A.R.S. § 23-961(N), published by the Industrial Commission of Arizona. (2) Employee’s Notice of Rejection of Terms of the Arizona Workers’ Compensation Law, Form ICA 04-0113, under A.R.S. § 23-906, used by officers and covered LLC members. It can be undone with the “Employee’s Notice to Revoke Rejection” form.
Where to file Neither form is filed with the Industrial Commission of Arizona. The Sole Proprietor Waiver is not valid until both the sole proprietor and the hiring employer’s insurance carrier sign and date it. The Notice of Rejection is given to the employer in duplicate before any injury, and the employer files a copy with its insurance carrier within 5 days. Forms: https://www.azica.gov/claims-filing-sole-proprietorindependent-contractor-statement and https://www.azica.gov/forms/employee-rejection-terms-form
Proof of exemption or coverage Show a certificate of insurance from your carrier. The Industrial Commission of Arizona offers a free online coverage lookup by business name or FEIN, using NCCI data. It shows the business name and policy number but does not show self-insured employers. Self-insured employers are listed separately on azica.gov. For exempt sole proprietors, the waiver must be signed by the hiring employer’s carrier. Lookup: https://www.azica.gov/obtaining-workers-compensation-coverage-information

What An Arizona Workers Comp Exemption Gives Up

An owner who is not covered or who signed a waiver gets no Arizona workers’ comp benefits if injured. An employee who rejects coverage under § 23-906 gives up workers’ comp benefits but generally keeps the common-law right to sue the employer. Confirm with the Industrial Commission and a licensed attorney.

One honest paragraph on the “ghost policy”: a minimum-premium policy with no employees sold to owners who need a certificate of insurance. It is legal in many states, but it is not an Arizona workers comp exemption — it is coverage with nobody on it. If you add a worker, it must be reported, or the audit will find them.

Workers Exempt by Law in Arizona

Separate from the owner’s election, Arizona law exempts some classes of workers from coverage — commonly domestic workers below a threshold, casual labor, some farm labor and licensed real-estate agents paid by commission. A worker who does not fit a listed class counts toward the threshold, no matter what the 1099 says.

Proving An Arizona Workers Comp Exemption or Coverage

Show a certificate of insurance from your carrier. The Industrial Commission of Arizona offers a free online coverage lookup by business name or FEIN, using NCCI data. It shows the business name and policy number but does not show self-insured employers. Self-insured employers are listed separately on azica.gov. For exempt sole proprietors, the waiver must be signed by the hiring employer’s carrier. Lookup: https://www.azica.gov/obtaining-workers-compensation-coverage-information

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Why the Arizona Workers Comp Exemption Matters

The Arizona workers comp exemption is a trade: lower cost today against no safety net if you are hurt. The second half of the trade is the one the search results never lead with. Arizona lets any employee, not just owners, reject workers’ comp coverage before an injury under A.R.S. § 23-906, using Form ICA 04-0113, and the rejection can later be revoked.

A business that uses a sole proprietor who signed a valid § 23-961(N) waiver does not owe coverage or premiums for that person. The waiver must also state that any employees of the sole proprietor must be covered.

Related statutes: https://www.azleg.gov/ars/23/00901.htm, https://www.azleg.gov/ars/23/00906.htm, https://www.azleg.gov/ars/23/00907.htm, https://www.azleg.gov/ars/23/00961.htm If the Arizona workers comp exemption rules above leave any doubt about whether a worker counts, ask the state agency before you decide — the answer is free, and the penalty for guessing wrong is not.

Employer side: the Arizona requirements guide covers the threshold, who counts and the penalties in full. Hurt while exempt? You may still have a claim against a third party — a licensed attorney can say.

Frequently Asked Questions

Who can file a workers comp exemption in Arizona?

Sole proprietors with no employees are not required to cover themselves (they may choose to buy coverage). A sole proprietor working as an independent contractor for an insured business may also sign a written waiver under A.R.S. § 23-961(N).

An LLC working member who owns 50 percent or more of the membership interest is not covered automatically and is covered only if they apply and the insurer accepts by endorsement, at the insurer’s discretion (A.R.S. § 23-901(6)(r)). Corporate officers and LLC working members who own less than 50 percent are counted as employees and covered automatically. Like any employee, they may reject coverage in writing under A.R.S. § 23-906.

There is no officer-count limit.

What form is the Arizona workers comp exemption?

There is no single state owner-exemption form. (1) Sole Proprietor/Independent Contractor Statement (Sole Proprietor Waiver) under A.R.S. § 23-961(N), published by the Industrial Commission of Arizona. (2) Employee’s Notice of Rejection of Terms of the Arizona Workers’ Compensation Law, Form ICA 04-0113, under A.R.S. § 23-906, used by officers and covered LLC members. It can be undone with the “Employee’s Notice to Revoke Rejection” form..

File it on the state’s own site; filing services charge for the same form.

Can an exempt owner in Arizona still collect benefits if hurt?

No. An exemption removes the owner from coverage, so there is no claim for medical care or lost wages. That is the trade.

Official Arizona Sources & Resources

This Arizona workers comp exemption guide was last verified against official Arizona sources in October 2026. Rules change — confirm the current figure with the state agency or a licensed attorney.

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Disclaimer: This guide is informational only and is not legal, medical, or financial advice. Workers Comp Explained is an independent educational resource, not a law firm or insurer. Workers’ comp benefits, settlement values, deadlines, and requirements vary by state and by the specific facts of your injury and change over time, and any settlement figures here are illustrative only.

Confirm your rights and any deadline with your state’s workers’ compensation board and a licensed attorney before you act.

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